With all of the snowfall last Friday, we decided to have our staff meeting outside and got creative with snow creations!
Premium Only Plan (POP)
The Section 125 Premium Only Plan (POP) saves employers and their employees money by reducing payroll taxes. It works by making one simple adjustment in their payroll process – employees pay their portion of the insurance premiums on a pre-tax basis rather than on an after tax-basis.
The Premium Only Plan (POP) reduces employers taxable payroll by reducing employees taxable income. So, both employers and employees pay less in taxes.
One of the best ways to save taxes
IRS-sanctioned Premium Only Plans (POP) were created by the Revenue Act of 1978 and are governed by IRS Code Section 125. With a Premium Only Plan (POP):
- Employees don’t pay FICA, federal, or where applicable, state or local taxes on money used to pay for their portion of employer-sponsored insurance premiums
- Employee’s tax savings help defray the cost of insurance premiums.
- Employees can increase their take home pay
- An employers taxable payroll is reduced by the total amount of employee contributions for benefits. Lower taxable payroll means lower payroll taxes.
Any employer can sponsor a Premium Only Plan (POP)
Regular corporations, partnerships, S corporations, LLC’s, sole proprietors, professional corporations, and not-for-profits can all save money on payroll taxes by establishing a Premium Only Plan (POP).
Who can participate?
While regulations prohibit a sole proprietor, partner, or members of an LLC, individuals owning more than 2% of an S corporation, or their spouse and dependents, from participating in the POP, they may still sponsor a plan and benefit from the savings on payroll taxes.
Begin saving taxes immediately.
You can start your Premium Only Plan (POP) at any time. Plus, you can have a short plan year for the first year, so that future plan years coincide with either your fiscal year or the calendar year.